Britain’s Cineworld Group said on Wednesday it had filed for bankruptcy protection in the United States as the world’s second-largest cinema chain operator struggles to find other ways to restructure its debt-laden balance sheet.
The Chapter 11 filing, which can allow a company to stay in business and restructure its debt, involves Cineworld’s U.S., UK and Jersey businesses.
The Regal cinemas owner has repeatedly warned that any deleveraging transaction would lead to very significant dilution of existing equity interests.
While the cinema industry has been struggling to recover from the pandemic, which has led to fewer blockbusters, lower theater attendance and increased popularity of streaming, Cineworld’s specific issue is the amount of debt it has amassed over the years.
The company took on debt to fund part of its $3.6 billion US purchase of Regal in 2017, and more to survive the pandemic. It was poised to merge with Canada’s Cineplex in 2019, before that deal fell apart.
Its net debt including lease liabilities stood at $8.9 billion at the end of 2021. Excluding lease liabilities, its net debt was $4.84 billion at that time. The company’s market value was just $62 million USat Tuesday’s close.
Cineworld operates more than 9,000 screens across 10 countries and employs around 28,000 people.